Bills would expand ability of nonprofits to raise funds in charity poker games

Last year, poker game fundraisers hosted by Michigan nonprofits brought in $93.5 million, less than half of the $197.3 million they raised in 2011, according to numbers self-reported by nonprofits to the Michigan Gaming Control Board, which regulates the games.

Legislation that would expand the ability of nonprofits to raise money through charity poker games and preserve permanent poker rooms' ability to profit at some level from them is back on the table.

The bills come in the wake of significant declines in charitable gaming in Michigan over the past six years as the state has tightened regulations of the games and halted them at permanent poker rooms where illegal activities were taking place.

Last year, poker game fundraisers hosted by Michigan nonprofits brought in $93.5 million, less than half of the $197.3 million they raised in 2011, according to numbers self-reported by nonprofits to the Michigan Gaming Control Board, which regulates the games.

Net profit to charities decreased along the same lines to $8.8 million in 2016 from $17.4 million in 2011.

During the same period, the number of charities hosting games dropped to 911 from 2,720, and the number of licensed events declined to 2,619 last year from 7,894.

A multiyear battle between nonprofits and poker rooms on one side and the Michigan Gaming Control Board on the other, led to turnover in the rules regulating the games up until June 2015, when the current rules took effect.

Those rules have limited the ability for permanent poker rooms to profit from the games and required more charity representatives to be present at the charity Texas Hold 'Em games, among other things.

Sen. Rick Jones, who introduced Senate Bill 35 in January, and State Rep. Tom Barrett, who introduced duplicate House Bill 4081, say the current rules are too restrictive, both for nonprofits and for permanent poker rooms.

There was a system in place for a decade that was working fine, Jones said. He agrees with Rick Kalm, executive director of the Gaming Control Board, that there were "a few bad apples" and supports going after them.

"However, (Kalm) has been so onerous and Scrooge-like, he's made it impossible for most of these charities to continue with this form of revenue raising," Jones said.

Nonprofits can't replace what they've raised through the poker games with candy and cookie sales, Jones said. "We need to codify into statute exactly what the rules are so all the charities can earn a few bucks" to support their missions, he said.

Part of the concern is that the Gaming Control Board would go further in regulating, Barrett said, blocking permanent poker rooms from hosting the games on behalf of nonprofits.

The board has suggested it could grant more licenses for charities if the organizations hosted the games on their own grounds, but part of the problem is many don't have their own buildings to host the games, "and some feel they shouldn't have to," he said.

"We would like to stipulate that the permanent poker rooms would not be prohibited by rule. ... The Gaming Control Board has shown an intent to really cut (rooms) out, and we don't think they should be. They're providing a service."

The Michigan Gaming Control Board is closely monitoring the legislation and will provide Gov. Rick Snyder with a thorough analysis if it progresses through the Legislature, said communication specialist Mary Kay Bean said in an email last week.

Criminal activity tied to "millionaire parties" was a reality when Snyder shifted regulation of them to the Michigan Gaming Control Board from the Michigan State Lottery in 2011, she said.

"Michigan law does not authorize 'charitable poker rooms.' Yet many places ran games illegally on behalf of the charities and operated like casinos without oversight or accountability," Bean said, which led to corruption and illegal activities.

The state was forced to halt games at 24 locations, and more than 30 individuals have pleaded guilty to crimes ranging from embezzlement to charitable gaming law violations.

As a result of tighter regulations, many popular places operating as permanent poker rooms prior to the new rules, such as Snooker's Poker Room in Utica, no longer function as millionaire party locations.

But the state has authorized new locations for the games, and today there are more locations hosting millionaire parties on a regular basis than existed before the administrative rules took effect, Bean said.

"Although more locations now may host millionaire parties than were operating a few years ago, the large-volume operations processing more than $25 million a year in chip sales as Snookers once did no longer exist," she said.

With limits the gaming control board has placed on the amounts that can be paid to the location and the supplier — no more than 45 percent of gross profits can go to cover costs — the net profit to nonprofits from the games increased the past two years to $8.8 million in 2016 from $6.9 million in 2014.

"Based on our research, Michigan has one of the biggest casino-style charitable gaming programs of its kind in America ... in the past three years, we've authorized 30,000 millionaire party games, which resulted in about $270 million in chip sales."

As passed out of the Senate Feb. 9, SB 35 would amend the Traxler-McCauley-Law-Bowman Bingo Act to, among other things, allow $20,000 in chips to be in play during a millionaire party event or up to $80,000 if the nonprofit licensee is not using dealers from a supplier and is hosting fewer than four days of events. In that case, the amount in play would be $80,000 divided by the number of days the event is being hosted. Currently, chip sales are limited to $15,000 per day.

It would also reduce the number of representatives that must be on hand from the benefiting charity or nonprofit to two from the current requirement of three.

At the same time, the legislation would uphold some of the current rules, including:

Allowing nonprofits to apply for each year to four, and allowing each to be used for up to four consecutive days of games.

Allowing two millionaire party events to take place concurrently at any single location and limiting the number of events to take place at a location to no more than four per week.

Allowing games to take place from 8 a.m.-2 a.m. the next day.

Prohibiting players from using chips to tip dealers.

Limiting expenses to no more than 45 percent of gross profit.

Prohibiting nonprofits from renting poker tables, chips and other equipment, from a location owner or lessor.

The Lansing-based Michigan Charitable Gaming Association recognized there were some bad actors at the time the governor moved oversight of the millionaire parties to the Michigan Gaming Control Board, said Executive Director Katharine Hude. And it applauds the board's efforts to address issues.

"Our contention is they've done a good job of cleaning up some of those lingering bad actors ... but they keep insisting there are bad actors (still) out there," she said.

The legislation introduced by Jones and Barrett will take away "arbitrary decision making" from the Gaming Control Board, Hude said. "If it's codified, our charities know exactly what to expect and the Gaming Control Board knows what to expect."